(China Daily/Agencies)
Updated: 2008-03-18 09:54

CITIC Securities Co canceled a proposed $1 billion investment in Bear Stearns Cos after the Wall Street brokerage was bought by JPMorgan Chase & Co, said the chairman of CITIC's parent company.

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CITIC Securities, China's largest securities firm by market value, also scrapped plans for a joint venture with Bear Stearns, CITIC Group Chairman Kong Dan said on Monday.

CITIC Group, China's largest investment company, owns 23.4 percent of CITIC Securities.

"We aren't carrying out the deal with them," Kong said. "The situation has changed."

Bear Stearns's 85 years as an independent company ended yesterday when Wall Street's fifth largest securities firm agreed to be taken over by JPMorgan after running short on cash.

Shares of both CITIC Securities and Bear Stearns have dropped at least 50 percent since the proposed investment was announced in October.

"Clearly, CITIC Securities's investment in Bear Stearns wasn't a very good idea in the first place," said Erwin Sanft, head of China and Hong Kong equities research at BNP Paribas Securities (Asia). "It's good for them (to back out)."

As part of the deal with Bear Stearns, the US company was expected to invest $1 billion in CITIC Securities. Kong didn't say whether that investment, too, had been scrapped. CITIC Securities spokesman Raymond Tang declined to comment.

CITIC Securities rose 0.9 percent to 58.50 yuan in Shanghai yesterday as the benchmark CSI 300 Index tumbled 4.6 percent to an eight-month low.

Financial stocks fell across Asia on the day after JPMorgan agreed to buy Bear Stearns for less than a tenth of its market value and as the Federal Reserve's emergency move to reduce its discount rate yesterday suggested the US central bank is concerned about a meltdown in financial markets.

CITIC Securities and Bear Stearns were planning to sell financial products and services together in China. The two also said in October that they would set up a Hong Kong-based venture to cover the rest of Asia.

On March 15, CITIC Securities said it "can't guarantee" that it would reach a final agreement with Bear Stearns. CITIC also said it hasn't made any payment, and that the original plan was "based on the condition that there isn't any abnormal financial situation with Bear Stearns".